Free Motion to Exclude - District Court of Colorado - Colorado

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I N T HE U NITED S TATES D ISTRICT C OURT F OR T HE D ISTRICT O F C OLORADO Civil Action No. 01-cv-0413-JLK M.D. MARK, INC. Plaintiff, vs. KERR-McGEE CORPORATION and ORYX ENERGY COMPANY, Defendants. DEFENDANTS' MOTION TO EXCLUDE LEGAL CONCLUSIONS FROM THE TESTIMONY OF PLAINTIFF M.D. MARK'S EXPERT WITNESSES Defendants Kerr-McGee ("Kerr-McGee") and Oryx Energy Company 1 submit this motion to exclude legal conclusions from the testimony of Plaintiff M.D. Mark's expert witnesses. I. INTRODUCTION

Rule 702 of the Federal Rules of Civil Procedure ("Rule 702") does not permit M.D. Mark's expert witnesses to opine on the applicable law. However, each opinion expressed by M.D. Mark's expert John E. Moye, and one opinion expressed by its expert Robert C. Gray, state legal conclusions. These opinions are inadmissible.

Oryx ceased to exist on February 26, 1999, at which time it became Kerr-McGee as a result of a statutory corporate merger.

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II.

LEGAL STANDARD

The proponent of expert testimony bears the burden of establishing admissibility under Rule 702. In re Breast Implant Litigation, 11 F. Supp. 2d 1217, 1222 (D. Colo. 1998). The trial court, however, acts as the "gatekeeper" and has broad discretion to exclude expert testimony that is not reliable or relevant. Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 589 (1993); Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 141 (1999); see also Norris v. Baxter Healthcare Corp., 397 F.3d 878, 883-84 (10th Cir. 2005). It is axiomatic that "[t]estimony which articulates and applies the relevant law . . . circumvents the jury's decision-making function by telling it how to decide the case." Specht v. Jensen, 853 F.2d 805, 808 (10th Cir. 1988), cert. denied, 488 U.S. 1008 (1989). There is "only one spokesman of the law, who of course is the judge." Id. at 807. Accordingly, the trial court must exclude expert testimony that attempts to define the legal standards upon which the jury's verdict must be based. Id. at 809-10. III. A. A RGUMENT

M OYE ' S O PINIONS U SURP T HIS C OURT ' S A UTHORITY TO D EFINE THE A PPLICABLE L AW .

Moye's expert report dated November 14, 2002 offers his opinions regarding Kerr-McGee's and Oryx's legal duties under the law governing corporate mergers and reorganizations, as well as their legal obligations under the seismic license agreements at issue. For example, Moye opines:

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In the case of PGI's license agreements acquired by Mark, each agreement restricted the transfer and use of the seismic data by any successor entity or related party. In an asset transfer, the assets of the acquired entity must be assigned and transferred to the acquiring entity, and such assignment and transfer would be subject to any contractual restrictions contained in the license agreements. It would not have been possible to transfer these licenses without the express consent of the licensor which would be subject to any conditions that the licensor may impose, including the payment of transfer or license fees and the furnishing of a new license agreement. If it were understood within the oil and gas exploration and production industry that seismic data licensed to an entity is not transferable through a corporate reorganization and other transactions except under customary conditions, those terms would become part of the license agreement. All of the PGI license agreements then in place prohibited the transfer of the rights under the license or the seismic data to other third parties, which would include an entity affiliated with the licensee or merger partner. Thus, the attempted transfer of the rights or the data to Kerr McGee Oil and Gas Corporation, which was not a party to the merger and is merely an affiliate of the constituent entities that had a right to use the data, was not permitted under any of the license agreements I reviewed.

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(Ex. A ­ Report of John E. Moye, ¶¶ 1-4, pp. 6-8.) The 10th Circuit's decision in Specht articulates why these opinions are inadmissible. In Specht, the trial court permitted the plaintiff's expert witness to offer his opinion as to whether the defendants' conduct constituted an illegal search. Id. at 80607. The Tenth Circuit, however, ruled that this testimony was beyond the scope of Rule

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702, and that permitting it was reversible error. Id. at 809-10. This exclusionary principle applies not only to testimony regarding substantive law, but also to opinions regarding the meaning of a contract's terms and the legal obligations imposed by them. Id. at 808 (citing Marx & Co., Inc. v. Diner's Club, Inc., 550 F.2d 505, 509-10 (2nd Cir. 1977), cert. denied, 434 U.S. 861 (1977). Also impermissible is expert testimony on the legal significance of facts. See Specht, 853 F.2d at 808. Moye's opinions fit squarely within the prohibitions established by Specht. Moye opines impermissibly on the substantive law regarding corporate mergers and reorganizations by discussing the legal obligations of a company that acquires the assets of another company. (Ex. A, ¶ 2, pp.6-7). Moye also applies the law, as he views it, to corporate transactions involving a subsidiary of Defendant Oryx's predecessor, Sun Oil Company, and a subsidiary of Defendant Kerr-McGee. (Id.) Moye then concludes that the transfer of seismic licenses without the express consent of the licensor--the exact conduct of which M.D. Mark accuses Kerr-McGee and Oryx--is not permitted under the license agreements at issue in this case. (Id.) Permitting Moye to offer this opinion at trial would "supplant both the court's duty to set forth the law and the jury's ability to apply this law to the evidence." Specht, 853 F.2d at 808. The remainder of Moye's opinions define the legal obligations of the parties to the seismic license agreements at issue in this case. For example, Moye opines that "the attempted transfer of the rights or the data to Kerr McGee Oil and Gas Corporation . . . was not permitted under any of the license agreements I reviewed." Through this opinion, Moye offers his conclusion on the biggest legal issue in this case ­ whether

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Oryx illegally "transferred" over 16,000 miles of seismic data to Kerr-McGee upon their corporate merger in 1999. (Ex. A, ¶ 4, p. 7-8.) Moye premises his legal conclusions partly on his opinion that the transfer of PGI Data was part of an asset acquisition rather than a corporate merger. (Ex. A, p. 67). This is yet another legal issue that the Court, not Moye, must determine. Moreover, every other statement in Moye's opinions offers conclusions as to the legal obligations under the seismic license agreements or opines on the legal significance of facts in the context of those agreements. (Ex. A, ¶¶ 1-4, pp. 6-8.) These opinions undermine the special legal knowledge of the judge and improperly address legal issues outside the factual questions that the jury must decide. Marx & Co., 550 F.2d at 510-11. Therefore, none of Moye's opinions are admissible. B. A P ORTION OF G RAY ' S O PINIONS I MPERMISSIBLY A PPLIES THE L AW .

Expert testimony that expands beyond what is common practice to include conclusions about what is permissible under the terms of a contract is not permitted. See Marx & Co., 550 F.2d at 509. Among the several opinions offered in Gray's export report dated November 15, 2002, Gray opines "I have reviewed several versions of the PGI license agreements . . . . It is my opinion that a seismic data licensee can not [sic] transfer seismic data to a surviving company in a merger unless the license agreement specifically provides for the continued use of the seismic data." (Ex. B ­ Expert Report of Robert C. Gray, p. 3.) Gray couches this and all of his opinions as a description of "the custom and practice in the oil and gas industry as it relates to the transferability of speculative seismic data." (Ex. B, p. 1.) Gray's opinion, however, goes beyond the

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custom and practice of the oil and gas industry by offering his conclusion as to how a corporate merger affects obligations under the seismic license agreements at issue in this case. (Ex. B, p. 3.) Therefore, Gray's opinion cited above constitutes an inadmissible legal conclusion. Specht, 853 F.2d at 809-10; Marx & Co., 550 F.2d at 510-11. IV. C ONCLUSION

Each of Moye's opinions and a portion of Gray's opinions offer inadmissible legal conclusions. This Court, therefore, should prohibit M.D. Mark from introducing any expert testimony from Moye. The Court should also prohibit expert testimony from Gray regarding the effects of a corporate merger on the seismic license agreements at issue in this case. Dated this 16th of January, 2007. Respectfully submitted,

s/M. Antonio Gallegos____________ Scott S. Barker Gregory E. Goldberg M. Antonio Gallegos H OLLAND & H ART LLP 555 Seventeenth Street, Suite 3200 Post Office Box 8749 Denver, Colorado 80201-8749 Phone: (303) 295-8513 Fax: (303) 975-5416 [email protected] [email protected] [email protected] A TTORNEYS F OR D EFENDANTS

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C ERTIFICATE O F S ERVICE
I hereby certify that, on January 16, 2007, I electronically filed the foregoing with the Clerk of Court using CM/ECF system which will serve such filing by e-mail to: Harlan P. Pelz Daniele W. Bonifazi Pelz, Bonifazi & Inderwish [email protected] [email protected]

s/Sally A. Walter ________________
3641436_1.DOC

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